Long-term joblessness tough on older workers

The job market smiles on older workers — and it also slams them. Workers age 55 and older enjoy the lowest unemployment rate of any age group — just 4.6% in February versus 6.7% for all workers and a whopping 21.4% for teenagers.

But once older workers lose a job, they face steep obstacles in getting rehired, and equally difficult financial challenges in managing a bout of long-term unemployment — including the prospect of never working again.

On average, workers age 55 and up were unemployed for 45.6 weeks, compared with 34.7 weeks for workers younger than 55, according to AARP’s analysis of non-seasonally-adjusted Bureau of Labor Statistics data from February.

All of the long-term unemployed “are suffering,” said Sara Rix, senior strategic policy adviser with AARP’s Public Policy Institute. And, she said, recent research suggests many of them “will never become re-employed.”

Older job seekers face added barriers to finding work, Rix said, including age discrimination and employers’ concerns about their technological competence and ability to learn.

Older workers also are likelier to give up looking for work, often collecting early and thus reduced Social Security benefits, “with considerable adverse consequences for their retirement-income security,” Rix said.

“If they do find work, the earnings decline is greater than for younger workers. And, of course, they have less time to recover their losses,” she said.

Nothing new

Not that it’s much consolation, but the difficulty faced by older workers in getting rehired is nothing new — nor can the blame be laid entirely at discrimination’s feet.

“Older workers who are unemployed are much more likely to be unemployed long-term than younger workers. This is true in good times and bad,” said Heidi Shierholz, a labor-market economist at the Economic Policy Institute, a nonprofit, liberal research group in Washington.

“If you’re unemployed and you’re a young person, you haven’t spent a whole career developing certain skills and experience, so it’s easier for you to find a match. Because older workers are more likely to have specific skills, it takes longer to find a match. That is of course exacerbated when job openings are scarce, like today,” Shierholz said.

Money moves after a job loss

For some lucky older workers, a job loss turns into a positive experience — for example, it leads to a long-desired career change — but that happy event usually requires the foundation of a relatively healthy personal balance sheet.

If the state of your finances is more tenuous, an unexpected job loss can be devastating.

Consider the following money strategies if you’ve lost your job and are near retirement age.

(Another version of these strategies first appeared in a MarketWatch Working Retirement column on Dec. 10.)

1. Don’t panic

When faced with an unexpected job loss, people often make quick financial decisions that they later regret. It may be difficult emotionally, but try to take a moment to assess your situation.

“A common mistake people make is to start putting things on credit cards to preserve their cash,” said Lea Ann Knight, a certified financial planner with Garrison/Knight Financial Planning LLC in Bedford, Mass.

That can easily backfire, leading to a heavy load of high-interest debt. Instead, your first choice for cash should be your emergency savings account. Also, consider any work-related severance payments, unemployment insurance and income from a part-time job if possible.

“Don’t panic and go cancel your gym membership if you’re the kind of person who goes to the gym every day,” Knight said. “That’s part of your well-being. People have a tendency to cut those things out quickly.”

2. Assess cash flow

When her clients find themselves unexpectedly facing an early retirement, Knight has them fill out a cash-flow work sheet. This is simply logging all of your expenses to determine which are fixed and which discretionary, so you know how much money you need each month.

“If you’re working, getting a paycheck every two weeks, you’re not always paying that close attention to your expenses,” Knight said.

A key piece, of course, is health-care costs. Figure out whether your health insurance will come via a new job, a Cobra plan from your old job, your spouse’s plan, Medicare or from the new health-care exchanges — and then assess your costs.

“Understanding what your medical insurance choices are and building that into a budget is really important,” Knight said.

3. Create a retirement plan

Ideally, you created a retirement plan long before your current predicament, but even if you didn’t, it’s not too late to create one. In fact, it’s imperative you do so now, said Artie Green, a certified financial planner with Cognizant Wealth Advisors in Palo Alto.

That could be a cash-flow plan or a goal-based plan, he said. With a plan based on cash flow, you estimate expenses and income into the future, making assumptions about investment growth and inflation.

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